Kit Juckes, Research Analyst at Societe Generale, suggests that the dollar has been a mid-table player in a league where the biggest winner by far is the Japanese yen and the big losers are the Mexican peso, the pound and the Korean won. Key Quotes “Yenbrella – a pattern has been established: The biggest short-term FX forecast change is to the yen. The conclusion in the FX Outlook was that “The yen, too, is likely to maintain its status as a funding currency that strengthens in times of financial market volatility. We may end up with USD/JPY rising modestly this year, but with a few brief periods when it trades significantly lower”. A saw-toothed pattern where USD/JPY falls sharply and then is hauled back up in a Sysephian (and therefore ultimately futile) effort by the BoJ isn’t easy to put into a forecast table, but our best guess is 1) the period of strength isn’t over yet, 2) it’ll take longer to drag USD/JPY back up than it took for the yen to surge in Q1 and 3) the whole exercise of temporary but significant yen strength will be repeated again in due course. An undervalued currency is a key pillar of Abenomics and will be needed until corporate reform delivers a long-term recovery in nominal GDP growth. All of that translates into USD/JPY falling to 110 or lower in H1 and possibly bouncing back above 120 at some point in H2.” For more information, read our latest forex news.